Do you dream of someday having a house of your own? Buying a house is the most expensive purchase many people make during their lifetime. An important first step is to start getting your finances in order. The sooner you do this, the better off you will be. That’s why it’s a good idea for teens to learn about what it takes to buy a house.
Buying your first home is a major accomplishment — one that many others may never achieve. It can also be an incredibly intimidating process. Between mortgage companies vying for your business, realtors looking to earn a commission, and a host of other things competing for your attention, it is easy to get overwhelmed.
Having a plan in place before you start house shopping is a good way to limit the stress and frustration of the process. So, take some time to learn what you will need to have and do first, then get it together. This quick guide on what you will need before buying your first house can help.
Make Sure You Are Ready To Buy a Home
Be absolutely certain that you are ready to purchase a house and committed to seeing the process though. This may seem like a silly thing to say, but not everyone is ready to buy a house. Once you sign the papers, you take on a huge number of responsibilities that, quite frankly, can’t be put off.
The reality is that home ownership isn’t for everyone. If you see yourself moving frequently or you have trouble managing your finances, renting may be a better option. However, if you are sure that owning a home is the right move, keep reading to see the next steps.
Check Your Credit
A solid credit history is important to securing the best mortgage rates. However, it takes time to build one. Establish a good banking history by making regular deposits and avoiding overdrafts. Get a steady job and a credit card. Retail store and gas credit cards are known for approving applicants with little or no credit history. Pay them off every month. Once you’ve established a few months of good credit with one of those, you can apply for a major credit card. We’ve found Discover to be the best for first-time users.
Many people never take the time to check their credit reports for errors. Even a small mistake could end up costing you thousands in interest over the life of a mortgage, so it’s worth the effort to take a look. Plus, everyone is entitled to a free copy of their credit report once each year. If there are some questionable spots in your credit history, you might still decide to move forward with a purchase and take advantage of favorable mortgage refinance rates later on.
Start Saving for a Down Payment
You’ll want to have at least a 20% down payment saved in order to avoid costly mortgage insurance. Remember, even if you aren’t able to save that much money — which can be significant depending on the area you are house shopping — every bit of down payment helps to get you a more favorable mortgage. So, start saving early and put away as much as you can.
Develop a Budget You Can Live With
A budget is only as good as your ability and willingness to stay within it. So, when taking the time to craft a household budget, make sure it is one that you can actually live with. Don’t restrict your spending to the point where the entire thing will unravel within a few months, and don’t rack up a lot of debt either.
Finding the right neighborhood is more important than finding the perfect house, and it can take quite a bit of time to do. You’ll want to start by deciding the maximum distance you are willing to commute for work or school. Narrow it further by examining the access to transportation hubs, such as major highways, trains or buses.
This can give you a good idea of where you want to search. However, you will still want to narrow exact neighborhoods down by looking into things like school quality and the availability of amenities that matter to you. Restaurants, nightlife, cultural attractions, and medical facilities are just a few things to consider.
Work With a Realtor
Now that you know where you want to look for your first house, it’s a good idea to work with a realtor. They can suggest a lender to get you preapproved for a mortgage amount that you can afford. They know the neighborhoods and can steer you to houses as they are listed. In a tight housing market, that can mean the difference between an accepted offer and missing out on the perfect starter home.
Buying a first house is a big step. Plan carefully by getting your finances in order, researching neighborhoods, and working with a realtor to choose the perfect house for your needs.